California

Apartment Construction in State Far Short of Forecasts

Construction of much-needed apartments in California is falling far short of what the state had expected this year, according to September building-permit figures released Thursday.

Builders statewide pulled permits last month at a rate that would result in 34,000 apartments and condominiums constructed this year, according to the state Department of Finance.

But Ted Gibson, the agency's chief economist, said he had forecast that about 50,000 multifamily units would be built this year, based on a surge in permits earlier this year.

"The housing shortage that much of California faces is getting worse rather than better," Gibson said. "The inability to build sufficient housing for the population is a major economic problem facing this state."

The slow pace of apartment building dragged down the overall increase in housing construction last month. Builders statewide pulled permits that would lead to a total of 133,500 units, on an annualized basis, up more than 4% compared with a year ago, according to the state agency.

Gibson, who had forecasted that permits for 156,000 units would be pulled this year, called the last three months of building activity a "disappointment."

To accommodate California's projected growth, the state would have to build at an annual rate of 220,000 to 250,000 housing units overall.

But builders are unable to keep up with growing demand, especially for large-scale apartment complexes. Among the reasons are greater opposition by homeowners to higher-density projects, more stringent approval processes at the local-government level and more challenges from environmentalists.

With construction falling short, record rents and housing prices probably will continue across much of the state, analysts said.

The state's figures are seasonally adjusted from raw permit numbers compiled by the Construction Industry Research Board in Burbank.

The bright spot for apartment renters was in Los Angeles County, where builders pulled nearly 24% more permits last month than a year earlier, according to the privately funded research board. A drop in single-family building permits, though, lowered overall county activity to an 11% gain.